Fixed term annuity vs Drawdown

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82082740#Comment_82082740

I seem to recall that there is a difference between having a guaranteed period and having value protection on your annuity from an IHT point of view. I thought the guaranteed period was better than the value protection but I may have got it the wrong way round. I think for the guaranteed period it may depend where the money goes - eg does it go to a nominated beneficiary under a discretion or does it go to the estate. In real life it may not make much difference if the beneficiary of the estate is the spouse.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82082740#Comment_82082740

A fixed term annuity is for say 10 years and at the end you get your initial money back ( sometimes even a bit more). From HMRC point of view this is seen as an investment that has to be counted back into your estate for IHT calculation, whereas a lifetime annuity does not even with a guarantee period, as there is no possibility of the original lump sum being returned.

That is my understanding anyway.

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82082373#Comment_82082373

I have found all of the responses extremely helpful - Thank you.

I was indecisive on the route i should take. Given all of the information and thoughts on this thread i have decided to stick with drawdown. It stresses me that i wont be in full control and is littered with uncertainty but drawdown has a greater chance of better returns. I have minimised the risks and stock market fluctuations with cash in savings, 12 months of income in a deposit fund within the portfolio which i draw on and a multi asset pension fund with approx 55% in stocks. Ongoing self management is a requirement i need to accept!

Catapult

I've been looking at annuity offers recently as the rates seem to be quite high at the moment according to PensionPuma - Aviva is somewhere around 7.8% (caveated). Must be a good time to buy if you're that way inclined..?

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/82083058#Comment_82083058

All the best in making the bold step. I am way too indecisive and lack conviction

Notepad_Phil

https://forums.moneysavingexpert.com/discussion/comment/82083057#Comment_82083057

Ongoing self management is a requirement i need to accept!

Sticking with drawdown does at least give you the opportunity to revisit your decision in a few years time.

https://forums.moneysavingexpert.com/discussion/comment/82083143#Comment_82083143

Maybe instead of going 100% drawdown or 100% annuity you could go 50/50 or whatever other split you're comfortable with. From previous posts I've seen you might not lose much in the % rate by annuitising a smaller amount so maybe something worth considering.

Moonwolf

https://forums.moneysavingexpert.com/discussion/comment/82083158#Comment_82083158

I was going to say this, that is what I have done with my £400k pot, 50% enhanced annuity and 50% drawdown. With my DB pensions that gives me a guaranteed income that covers needs and drawdown for luxuries. I have no worries about stock market plunges but I can still draw down flexibly from what is left in the pot.

Nick9967

Fascinating discussion, i spent 3 years plus on this forum (thanks all your 're a hive of well intentioned info!) working out what to do, expenses, drawdown rate, tax free, 15 different spread sheets all connected etc etc, in the last 6 months I've gone 360 degrees and have settled on Fixed term guaranteed 20 years as the rates are so good, it gives me piece of mind and clarity , not the most effective when it comes to tax I'm sure . I've allocated inflation to my expenses rather than income , i think i can control it better that way. I was having sleepless nights about the fluctuation of my funds etc so i switched, just doing the application now through a broker, go part time 12th October and the relief i feel is indescribable , 2 days a week work for 18 months, and i'll be almost exactly the same financially , which will only get better as i get older and likely spend a bit less! My pot isn't huge but it's enough to give me £20k a year , just under, plus my savings, the tax free i'll have stashed away as a back up and to add to my income as i need it, i will live my life as i want to from 59-84 , the sell my second house to see me through , I'm lucky with that, but one thing has become apparent to me at this age, life is to be lived whilst we have it and not to be panicking about anything. (of course if my pot were much bigger I'd do it slightly differently) , but i think I'm fairly average with £300k ish in my pension, a tiny DB and FSP to come, a house paid off , you know what if it gets a bit ropey i'll sell it and buy smaller else where. Just a pointer for the non experts , if you use a fixed term calculator like Money Helper which is pretty good, the rate is gives you is the non-guaranteed rate , so take off between 1.5 - 3.0% and that's more or less what you'll get applying for an annuity (fixed term, guaranteed, month in arrears) that maybe useful for someone,. Thanks all genuinely thankful for all the help!

onthemend

https://forums.moneysavingexpert.com/discussion/comment/82087466#Comment_82087466

Nick

I'm in an almost identical position. I've just retired aged 65 and also gone for 20 year fixed annuity with 50% for 2nd annuity life. As you mentioned rates are really good and I wanted that peace of mind going forward.